Federal Court Denies Interlocutory Injuction to Boston Pizza International Due to Insufficient Evidence of Irreperable Harm

FEDERALCOURTDENIESINTERLOCUTORYINJUNCTIONTOBOSTONPIZZA
INTERNATIONALDUETOINSUFFICIENTEVIDENCEOFIRREPERABLE
HARM

StellaSyrianos
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
55St-Jacques,Montreal(Quebec)CanadaH2Y3X2
Tel.(514)987-6242-Fax(514)845-7874
E-mail:marion@robic.com-WebSite:www.robic.ca

TheFederalCourtofCanadarecentlydeniedinjunctivereliefsoughtbyBostonPizza
InternationalInc.againstBostonMarketCorporationforitsuseofthetrade-nameBOSTON
MARKETinCanada(BostonPizzaInternationalInc.etal.vs.BostonMarketCorporationet
als.(2002)T-1319-02,April1
st,2003,Blanchard,J.)

Theplaintiffs,BostonPizzaInternational(BPI)andBostonPizzaRoyaltiesLimited
Partnership(hereafter:”Applicants”),filedamotionforaninterlocutoryinjunctionagainstthe
defendants,BostonMarketCorporation,McDonald’sRestaurantsofCanadaLimited,Boston
MarketCanadaCompanyandGlobalRestaurantOperationsofIrelandLimited(hereafter:
“Respondents”)forthepurposeofrestrainingtheRespondentsfrom:

(i)usingthetradename”BostonMarket”inCanadainassociationwiththeoperationor
marketingofrestaurantsorsaleofpreparedfoods,advertisingorcarryingonbusinessin
associationwiththetradename”BostonMarket”;

(ii)usingthetradename”BostonMarket”inCanadainamannerlikelytodepreciatethe
valueofthegoodwilloftheApplicants’trademarkBOSTONPIZZA,ordirectingpublic
attentiontotheRespondents’businessthroughtheuseofthename”BostonMarket”ina
mannerlikelytocauseconfusionwiththebusinessoftheApplicantsanditsfranchisees.

ThemotionforthisinterlocutoryinjunctionaroseinthecontextoftheApplicants’actionfor
infringementofthetrademarkBOSTONPIZZA,depreciationofgoodwill,andpassingoffin
violationoftheTrade-MarksAct.

TheFacts

TheApplicant

BPIisthelicenseeofthetrademarkBOSTONPIZZAregisteredinthenameofBostonPizza
RoyaltiesLimitedPartnership.BPIanditspredecessorshaveusedthetrademarkBOSTON
PIZZAinCanada,sinceNovember6,1965inassociationwiththeoperationofafranchise
restaurantandtake-outbusiness.BPIownstworestaurantsinCanadaandhaslicencedthetrade
nametofranchiseeswhooperate162restaurantsinCanada.

2

PatronsofBPIaretreatedtoanarrayoffoodsincludingpizza,pasta,lunchdishes,appetizers
andbeveragesandhavetheoptionofdine-inordeliveryservice.Ithasthelargestmarketshare
inthe”casualdining”chainsinCanadaandintendstodevelop70-80newrestaurantsinthenext
fiveyears,amongthese30inOntario.Whiletheirrestaurantsaremainlylocatedinwestern
Canada,BPIhasalsoexpandedinOntariowheresince1998,thenumberofBOSTONPIZZA
restaurantshasincreasedfrom4to21.

BPIstatedthatitusesitstrademarksextensivelyinadvertisingandmarketingonmenus,
stationery,pamphletsandinrelationtoitscharitablefoundation.Itexercisestightcontrolover
itsfranchiseestoensurethatthedecor,nature,andqualityoffoodareconsistentinorderto
ensurethatthevalueofthetrademarkismaintained.Advertisingisfinancedthroughaco-op
fundcontributedtobyBPIfranchisees.

TheRespondents

TherespondentsstatethatBostonChicken,Inc.operatedrestaurantsintheUnitedStatesin
associationwiththetrademarkBOSTONCHICKEN,with500restaurantsestablishedby1994.
In1995,BostonChicken,Inc.expandeditsrangeofmealsunderthetrademarkBOSTON
MARKET.In1998,BostonChickenfiledforbankruptcyprotectionintheUnitedStatesand
soughttoreorganize.In2000,McDonald’sCorporation,throughasubsidiary,acquiredcertain
tangibleassetsofBostonChicken.ItsnamewaschangedtoBMCorp.andithasoperated
BostonMarketrestaurantsintheUnitedStatessinceMay2000.

SituationinCanada

BostonMarketCanada,carriesonbusinessinCanadainassociationwiththeBOSTON
MARKETbrand,underlicencefromtherespondentGlobalRestaurantOperationsofIreland
Limited.BostonMarketCorporationisawholly-ownedsubsidiaryofMcDonald’sCorporation.
AllfouroftheRespondentsareaffiliatedcompanies.

TheRespondentsopenedtwoBOSTONMARKETrestaurantsinOntario,onSeptember
9th,2002andDecember2002respectively.AthirdBOSTONMARKETrestaurantisslatedto
openinJune2003,alsoinOntario.

Theconfusionissue:theApplicants’Position

TheApplicantstenderedevidenceintheformofaconsumersurvey,conductedbyanexpertin
marketingresearch,probingtheopinionsof623Canadianadults.Accordingtotheresultsof
thesurvey,18%ofthepopulationthatvisitsrestaurantsorpurchasestake-outfoodswaslikely
toperceivethatrestaurantsoperatedinCanadaunderthenameBOSTONMARKETand
BOSTONPIZZArestaurantsareoperatedbythesamecompany.Thisestimateincreasedto

3
30%whenthepopulationofrespondentswasrestrictedtothosepeoplewhosaidtheyhad
previouslyheardoforseenaBOSTONPIZZArestaurant.

TheRespondents’Position

TheRespondentsarguethatBOSTONMARKETrestaurantsinCanadahaveadifferentfocus
thanBOSTONPIZZArestaurants.Theyadvancethattheretherearefourrecognizedcategories
ofrestaurants:”quickservice”,”fastcasual”,”casualdining”and”finedining”andthat
BOSTONMARKETrestaurantsinCanadafallintothesecondcategory”fastcasual”because
theyaimtocatertothe”homemealreplacement”or”take-outmarket”whereastheBOSTON
PIZZArestaurantsfallintothethirdcategoryof”casualdining”.Oncross-examination,the
ApplicantsacknowledgedthiscategorizationandagreedwiththeRespondent’sallegationthat
BostonPizzaisa”casualdining”restaurantasopposedtoBOSTONMARKETS“fastcasual”
diningwhichiswithout”fulltableservice”.

Throughtheirexpert,theRespondentsarguedthatconsumerchoicesofrestaurantsarebasedon
morethananamebecausetheylooktootherfactorsthananame.Healsoclaimedthatno
confusionwaspossiblebecausethepartiesdidnottargetthesamemarketastheyfellinto
differentcatagoriesofeatingestablishments.

Theissuesatbar

TheCourtreviewedthethreebasiccriteriaappliedtointerlocutoryinjunctionapplicationsin
ordertoassessiftheApplicantsweretobesuccessful:

(i)havetheyraisedaseriousissuetobedetermined?
(ii)willtheysufferirreparableharmiftheinjunctionisnotgranted?
(iii)doesthe”balanceofconvenience”favourthethem?

Seriousissue

Thethresholdforthisfirstelementisrelativelylowinthatoncesatisfiedthattheapplicationis
neithervexatiousnorfrivolous,themotionsjudgeshouldproceedtoconsiderthesecondand
thirdtests,evenifoftheopinionthattheplaintiffisunlikelytosucceedattrial.

TheFederalCourtheldthattheApplicantshadfurnishedevidenceofatleastsomeconfusionin
theformoftheconsumersurveyandwassatisfiedthattheconclusionsregardingconsumer
confusionprovidedasufficientevidentiarybasistosatisfythelowthresholdof”seriousissue”.

AlsoworthnotingwasthattheRespondentsconcededinoralargumentthataseriousissuehad
beenraisedandtheCourtagreedwiththepartiesthattheApplicantshadmetthefirsthurdleof
showingthattheirapplicationwasneithervexatiousnorfrivolous.

Irreparableharm

4
Astothenatureoftheirreparableharm,theCourtreiteratedtheprinciplesetoutbythe
SupremeCourtofCanadainR.J.R.MacDonald,supra,R.J.R.McDonaldInc.v.Canada
(AttorneyGeneral)(1994),111D.L.R.(4
th)385,405:

“Irreparable”referstothenatureoftheharmsufferedratherthanitsmagnitude.Itis
harmwhicheithercannotbequantifiedinmonetarytermsorwhichcannotbecured,
usuallybecauseonepartycannotcollectdamagesfromtheother.Examplesofthe
formerincludeinstanceswhereonepartywillbeputoutofbusinessbythecourt’s
decision[…];whereonepartywillsufferpermanentmarketlossorirrevocable
damagestoitsbusinessreputation[…];orwhereapermanentlossofnatural
resourceswillbetheresultwhenachallengedactivityisnotenjoined[…].

TheFederalCourtalsolookedtoanothercase,CentreIceLtd.v.NationalHockeyLeague,
(1994),53C.P.R.(3d)34,wheretheFederalCourtofAppealarticulatedthattheharmmustbe
“clearandnotspeculative”,statingthatafindingofconfusionbetweencompetingproducts
doesnotnecessarilyleadtoalossofgoodwillandtheremustbespecificevidencethatlinksthe
confusiontoaloss:“…Whiletherecordcontainssomeevidenceofconfusion,thereisno
specificevidencethatsuchconfusionhadledanycustomertostopdealingortoevenconsider
notdealingwiththerespondentonfutureoccasions.”

TheApplicantssubmittedthatifBOSTONMARKETwasallowedtocontinuetousethe
BOSTONMARKETnameandopenrestaurantsintheTorontoarea,consumerconfusion
wouldensuewhichwouldsubsequentlyresultinlostsalesanddilutionofbrandequity.
Becauseoftheconfusion,somecustomerswouldvisitBostonMarketrestaurants,believing
themtobeownedbyBostonPizza.Theapplicantsstatedthatitwouldbeimpossibleto
determinehowmanycustomerstheywouldlosebutthatsuchlosesconstitutedharmthatis
unquantifiableandwhichdisruptedtheirexpansionplansinOntario.

Ontheotherhand,theRespondentscontendedthattheApplicantsfailedtoprovidedirect
evidencethatBOSTONPIZZAwillsufferbusinesslosses,losstolongtermmarketshare,
dilutionofbrandequity,lossofconsumerloyaltyandharmtoitsfranchisesystem.The
respondentsstatedthatiftheApplicantshadtenderedsomeevidenceofconfusion,therewasno
specificevidencethatsuchconfusionhadledevenonecustomertostopfrequentingBOSTON
PIZZArestaurants.TheRespondentsfurthersubmittedthateveniftheApplicantshad
establishedclearandnon-speculativeevidencethattheconfusionwouldleadtoaloss,thisloss
isquantifiable.

TheFederalCourtagreedwiththeRespondentsandheldthatwhiletherewassomeevidenceof
confusionaccordingtothesurveyevidence,thenatureofharmcausedtotheApplicantsasa
resultofthisconfusionwasnotclear.TheCourtfoundthattheApplicants’expertevidenceon
theissueofirreparableharmonlyprovidednumeroushypothesizedscenariosthatmay,ormay
not,havematerialized:
Hisuseoftheterm”may”throughouthisanalysisoflossofsalesleadsmetoconcludethat
theobservationsuponwhichhebaseshisconclusionsarespeculative.Thisisnotclearand
non-speculativeevidencethatisrequiredbyCentreIceLtd.,supra,tosatisfythetestfor
irreparableharm.Ithereforeconcludethattheevidenceuponwhichtheapplicantsrelyto
establishirreparableharmisspeculativeandconsequentlyinsufficienttoestablish
irreparableharm.

5

TheFederalCourtalsotookintoaccounttheevidencethatthetworestaurantsattracted,atleast
inpart,customersfromtwodifferentmarketssinceBOSTONPIZZAandBOSTONMARKET
fellintotwodifferentcategoriesofrestaurant,“casualdining”and“fastcasual”,respectively.
Subsequently,theCourtquestionedtheApplicants’assumptionthattherestaurantstarget
similarmarketsandfoundthattheApplicants’expert’sconclusionsconcerningtheharm
causedbycustomerconfusionwereopentoscrutiny.Onthisbasis,theCourtfurtherconcluded
thattheApplicantshadnotdemonstratedirreparableharmtotheirbusinessonthebasisofloss
oftheircustomerbase.

TheApplicantsalsoarguedthatareadevelopersandprospectivefranchiseeswouldhavebeen
dissuadedfrompurchasingorcontinuingtheirinvestmentinaBOSTONPIZZAfranchiseasa
resultofthepresenceoftheBOSTONMARKETtradenameinthemarket.Inresponsetothis
allegation,theCourtfoundthattherewasnoevidencebeforeitthatanypotentialfranchiseesor
customershadbackedoutofcontractsorrefrainedfrompatronizingBOSTONPIZZAonthe
basisofthatconfusion.

Balanceofconvenience

DespitetheCourt’sfindingontheissueofirreparableharm,itneverthelessconsideredthis
thirdelementandheldthatthebalanceofconveniencefavouredtheRespondentswhohadspent
moneyonelaborateadvertisingandmarketingcampaignsusingthenameBOSTONMARKET
innewspaperadvertisements,billboardsigns,andlettermailoutsto50,000households.

TheCourtopinedthatiftheRespondentswereobligedtochangetherestaurantname,the
benefitsfromtheseadvertisingeffortswouldbewhollylostandtheirlosswouldbecertainand
tangible.

Delay

Finally,theCourtstatedthatthefactorofdelayinbringingtheinjunctionapplicationwasalso
relevant.TheApplicantshadknownabouttheplansforthedevelopmentofBOSTON
MARKETrestaurantsinOntariosinceOctober2001,whentheRespondentsissuedapress
releaseanddrewtheApplicants’attentiontoit.TheApplicantsonlymadetheirobjections
knownninemonthslateronAugust15,2002andbythen,theRespondentshadinvestedinthe
constructionofrestaurantsandadvertisingcampaigns,usingthenameBOSTONMARKETS.

TheCourtdismissedtheApplicants’attempttominimizethedelayperiodbyconcludingthat
presumedanticipationoflitigationtodeterminetheissueofconfusiondidnotprovideabasis
fortheApplicantstojustifytheirdelayinnotifyingtherespondents.

Conclusion

6
Thiscasereiteratesthelongstandingprinciple,appliedvigorouslybytheCourts,thatthegrant
ofaninterlocutoryinjunctionisanextraordinaryremedythatshouldbereservedtothosecases
wherethereisclearevidenceofcircumstancesrequiringitsimposition.Plaintiffsseekingto
refrainthirdpartiesfromusingtrade-marksortrade-namesshouldbemadeawareofthehigh
thresholdassociatedwithprovingirreparableharm.Moreover,theyshouldnotlosesightofthe
typeofevidencerequiredbytheCourtsontheissueofirreparableharm:clearandnot
speculative.

AstotheultimatemeritsoftheApplicants’actionforinfringementoftheirBOSTONPIZZA
trademark,itwillbeinterestingtoobservewhattheimpactwillbe,ifany,oftheFederalCourt’s
decisionofSeptember17
th,2001,inBostonPizzaInternationalInc.vs.BostonChickenInc.,
(2001)15C.P.R.(4th)345(F.C.T.D)[commentedbytheauthorintheDecember2001editionof
theWIPR],whereJusticeNadonruledthattherewasnoconfusionbetweenthemarksBOSTON
PIZZAandBOSTONCHICKEN.

©LEGERROBICRICHARD,2003.